Tuesday, August 31, 2010

On August 22, 2010 the commander of U.S. forces in Iraq, General Ray Odierno, made his rounds of the American Sunday morning television talk shows. In part of his comments he said that Iran continued to interfere in Iraq, opposed a strong democracy there in favor of a weak state that could not pose a threat, and supported Shiite militias. A few days later the new U.S. Ambassador James Jeffrey stated that one-quarter of the U.S. casualties in Iraq were due to Iranian backed groups, but that Tehran's influence was sometimes overblown. In the past, Iranian academic and member of the Kennedy School of Government at Harvard Kayhan Barzegar has tried to explain the motivations behind Tehran’s Iraq policy.

Barzegar thinks that there are two ways to interpret Iran’s foreign affairs. One is to view Iran as an ideologically driven, rogue state that is a threat to security, and who therefore has to be confronted. That is the common view in America. The other is to look at Iran like any other state whose policies are shaped by its politics, history, and security concerns.

Barzegar advocates the second approach, which he claims can be seen when analyzing Iran's worldivew. One important factor shaping that is the great powers. Iran has always felt that Europe and America have tried to control it. Another element is the belief that Iran can play a role in the Arab world because of its historical, cultural, and religious ties. In fact, Tehran has felt that it could balance its relations with the West through its Middle East policies. Last is its security. Iraq has been Iran’s greatest rival dating back centuries. The most recent example of that was Saddam Hussein launching the Iran-Iraq War in 1980.

This history and culture has played out in Iraq in several ways. First, the overthrow of Saddam opened up great opportunities for Tehran. Even before the invasion, it felt that it would have influence over Iraq’s new politics because it supported Shiite exile parties like the Supreme Islamic Iraqi Council and the Dawa Party who it hoped would come to lead the Shiite majority. That came to fruition as those two parties came to power as part of the United Iraqi Alliance in the 2005 elections. In 2010 Iran helped put together the Sadrist-Supreme Council led Iraqi National Alliance, and then got them to unite with Prime Minister Nouri al-Maliki’s State of Law after the March vote. Iran has also become one of Iraq’s greatest trade partners tying the two economies together. Those friendly Shiite parties also helped assure Iran that Iraq would not pose a threat again. The U.S. occupation, and Bush administration comments about regime change and Iran’s nuclear program however didn’t mean that all of its security concerns were resolved. To counter these newest threats by the West, Tehran backed Shiite militants like the Mahdi Army and Special Groups to tie down American troops in Iraq in the hopes that would delay any action against Iran. Finally, thousands of Iranian pilgrims travel to Najaf and Karbala, two of the holiest Shiite sites in the world strengthening the religious and cultural ties between the two.

Barzegar believes that Iran has followed a pragmatic, rather than ideological approach to Iraq with great success. It has expanded its influence in the Middle East, confronted and countered the West, created new economic and religious relations, and secured its western border and eliminated its greatest threat with its Iraq policy. That doesn’t mean that Tehran calls the shots in Baghdad. The Iraqi National Alliance has rejected Iranian pressure to support Maliki for a second term as premier for example. What it does mean is that it can shape events in Iraq. For instance, it raised and lowered the violence level in Iraq by increasing or withholding weapons and supplies to Shiite militias. That’s the reason why Gen. Odierno and other American officials have continuously warned about Iran’s activities in Iraq. While a continued U.S. presence in Iraq could be a counterbalance, the growth of Iraqi nationalism that was apparent in the 2009 and 2010 elections is the only thing that can ensure a more equal relationship between the two sides in the long run. That’s still developing so Iran can be expected to play a leading role in Iraqi affairs for the foreseeable future.

The Organization for Economic Cooperation and Development (OECD) consists of 32 countries committed to free market capitalism. It has a credit risk classification system that affects the interest rates OECD members charge others. The organization places nations in eight categories with 0 being the best and 7 being the worst. In the first half of 2010 it completed its latest evaluation of the credit risks of the Middle East and North Africa. Iraq received a 7, the same score that it has gotten since 1999.

As a recent survey of 300 executives by the Economist Intelligence Unit found in July, many still believe that Iraq is too unstable to do business in. While 55% said that Iraq would show some form of improvement in the next two years, 64% thought that it was too dangerous to invest in right now. The main reasons were on-going violence, corruption, lack of infrastructure, the bureaucracy, inadequate contract protection, and credit risks.

Both of these factors obviously affect the country’s ability to gain international loans. So far, only Japan, Italy, Iran, the International Monetary Fund (IMF), and World Bank have been willing to advance Iraq any large amounts of money. Japan has been the most generous, with $3.28 billion in loans, followed by $930 million from the IMF, $900 million from the World Bank, $400 million from Iran, and $300 million committed by Italy. Iraq actually received two loans recently from the IMF and World Bank to cover a possible budget deficit this year, largely because Baghdad has worked with both organizations closely to settle its debts, control inflation, and institute economic reforms.

The bad business environment means that most countries, banks, and companies are unwilling to put their money in Iraq at this time. That’s reflected in the bad score by the OECD, and the negative perceptions shown in the Economist Intelligence Unit survey. Until violence subsides and the government institutes some meaningful reforms, Iraq is likely to continue to be seen as a credit risk.

Sunday, August 29, 2010

Iraq's oil industry has seen a slow decline this year. In December 2009 the country produced 61.3 million barrels. That has not been achieved since then. In January output dropped to 59.7 million barrels, then 57.9 million in February, 57.1 million in March, before hitting a yearly low so far of 53.0 million barrels. Afterward, production went up and down to 58.7 million in May, 54.7 million in June, before reaching 56.3 million in July. Profits have dropped as well. In December and January Iraq earned $4.4 billion each month. That dropped down to $4.2 billion in April even though a barrel of Iraqi crude was selling for $79.66, the highest price in nearly two years. By June profits had declined to $3.8 billion, before slightly recovering to $4.0 billion in July.

This is actually nothing new. Since 2004, oil production has continuously fluctuated, slightly rising and falling every couple months due to the weather, bottlenecks, maintenance, and attacks upon the northern pipeline. Average yearly production however, has always stayed around 2 million barrels a day because the industry is at capacity. That means, despite the decline in recent months, by the end of 2010 output will probably be close to previous years. More importantly, Iraq is looking to have far larger profits this year than last because oil prices have recovered from the affects of the world recession.

Many small to medium sized petroleum companies like Genel Enerji originally entered Kurdistan after the 2003 invasion hoping to strike oil, eventually start exporting, and perhaps turn that into a bigger deal with a multinational corporation. Those dreams have been unfulfilled as Baghdad called all the Kurdish deals illegal, and banned any company that works in the KRG from operating in the much larger southern oil fields. With the argument between the central and regional governments over petroleum not likely to end anytime soon, Genel may be regulated to exploration work and limited oil production with no big payoff in the end. That may be the reason why the company is interested in getting partially or totally out of Kurdistan.

In August 2010 the Kurds’ Natural Resource Minister Ashti Hawrami gave a press conference where he claimed that the Kurdistan Regional Government (KRG) could produce 1 million barrels of oil a day by 2014. The Kurds have made this claim before, and have used it to pressure Baghdad into letting them export petroleum by tempting them with how much extra revenue they could earn if all the northern oil fields were up and running. The problem for the KRG is that it lacks the infrastructure to produce that much, and with international energy companies starting work in southern Iraq there is no pressure on Baghdad to allow the Kurds to continue with their independent oil policy and let them export.

In 2009 the Kurds were allowed to export for a few months. From June to October 2009 the Oil Ministry okayed Kurdish exports from the Tawke and Taq Taq fields. Together they produced 60,000-90,000 barrels a day, with 40,000-60,000 barrels going to exports. Problems developed over who would pay the companies running the two fields, Baghdad or the KRG, which eventually led to the deal between the two sides to breakdown. In early 2010 there were talks to renew exports, but they were put on hold until after a new government was formed.

The Kurds have grown impatient since then and have tried to nudge Baghdad back to the negotiating table. The first move was to go public with its oil smuggling to Iran, to show that the region was already capable of foreign sales even if they were illegal. Second, was Minister Hawrami’s claim that the KRG could produce 1 million barrels a day. That was meant to show the Oil Ministry the potential Kurdistan has. The problems with the first move were that the Kurds have been shipping oil to Iran since the 1990s, the amounts are relatively small, and the announcement only infuriated Baghdad rather than pushed the two sides together. The Natural Resource Minister’s statement to the press was more serious since Kurdistan does have roughly one-quarter of Iraq’s oil reserves. Experts however, doubt that the KRG has the capacity to produce 1 million barrels a day within 4-5 years. In 2009 for example, it was reported that the Taq Taq field only had a capacity to produce 30,000 barrels a day, which could be doubled in a year. The other operating field, Tawke is a little larger, but together they do not have the potential Minister Hawrami claimed. A more realistic amount might be 500,000 barrels a day. Kurdistan is also not connected to the northern pipeline, so all of its oil has to be shipped by truck, severely limiting its exports. Finally, the foreign energy companies are beginning work on the deals they signed last year, and the Oil Ministry claims that they can boost production to 12 million barrels a day. That lessons the appeal of compromising with the KRG because Baghdad believes it can achieve a dramatic increase in oil and revenues on its own.

The statement by the Kurdish Natural Resource Minister was just the latest attempt by the KRG to push Baghdad back to the negotiating table over exports. Unfortunately, there will be little movement on the issue until a ruling coalition is put together, ministries are divided up amongst parties, and the new premier and oil minister decide on their policies. Until then, the Kurds will just have to wait before there is a breakthrough between the central and regional governments over oil.

Thursday, August 26, 2010

The U.S. is moving ahead with its withdrawal plans from Iraq. On August 24, 2010 the commander of U.S. forces in the country, General Ray Odierno, said that American troop levels had dropped to 49,700. A private Iraqi firm, Asharq Research Center, conducted a poll of 1,150 people, aged 18 and above in all of Iraq’s 18 provinces from August 15-23 about what they thought about it. The majority said that it was the wrong time for the Americans to leave.

The Asharq Research Center asked four questions of Iraqis. The first was whether it was the right time for the U.S. to withdraw. 59.8% said it was not appropriate at this time, while 39.5% said it was. Next they asked whether people were for or against President Obama’s decision to end combat missions within Iraq. Respondents were more evenly divided with 53.1% disagreeing, and 46.2% agreeing. The third question was about what affect the U.S. withdrawal would have on Iraq. 51% said it would be bad for the country, with 25.8% saying it would be positive. The last topic was whether President Obama was concerned about Iraq. Respondents had mixed views with 41.9% saying that he didn’t care about Iraq, 39.8% said he did, while 15.5% didn’t know.

The August poll shows that Iraqis are quite apprehensive about the U.S. leaving Iraq. With no new government five months after parliamentary elections, and insurgents picking up with their high profile operations such as on August 25 when simultaneous attacks were carried out in 13 different cities including Baghdad, Basra, Mosul, Fallujah, Ramadi, Tikrit, Kirkuk, Kut, and Karbala, it’s no wonder why some Iraqis are asking whether this is the right time for the Americans to withdraw. Despite the problems and resentment that the invasion caused, it appears that a slight majority of those polled believe that the U.S. could help with at least security. That’s a view shared by the Iraqi military as the chief of staff of the armed forces recently said that the Americans should stay until 2020 to help with national defense. Gen. Odierno made similar statements as well in the past few days. The problem is that the Obama administration is working on a Washington agenda that is caught up with the recession, the war in Afghanistan, keeping Obama’s campaign promises about Iraq, and the November elections. That means while U.S. troops will continue to work with their Iraqi counterparts on training, advising, counterterrorism, development, and governance, and a small contingent will probably remain past the 2011 deadline for them to be out, the period of massive U.S. involvement in every facet of Iraqi society is coming to an end, and nothing is likely to change that. Iraqis are going to have to handle their own affairs with all the difficulties that entails whether they are ready or not.

August 2010 Asharq Research Center Polling Results

Is it the right time for the U.S. to withdraw?
59.8% No
39.5% Yes

Do you agree or disagree with President Obama’s decision to end combat missions on August 31, 2010?
53.1% Disagree
46.2% Agree

How will the U.S. withdrawal affect Iraq?
51% Negatively
25.8% Positively

Does President Obama care about Iraq?
41.9% No, he doesn’t
39.8% Yes, he does
15.5% Don’t know

Wednesday, August 25, 2010

In the March 2010 parliamentary elections the Sadrists won a surprising 40 seats, the largest amount within the Iraqi National Alliance (INA). Since then Moqtada al-Sadr’s followers have largely played the role of spoiler, consistently rejecting Nouri al-Maliki’s nomination for a second term as prime minister. In August, the Sadr Trend tried to change its tune by coming out in support of Iyad Allawi and his Iraqi National Movement (INM).

In the past few days, the Sadrists have said that they believe the National Movement has the right to form a new government. On August 19, Allawi and Sadr held a phone conversation, and the next day a member of the Sadr Trend told the press that a ruling coalition would be formed out of the National Movement, the National Alliance, and the Kurdish Alliance. On August 21, another member of the Sadr movement said to Al-Hayat that Allawi had their support. Two days later it was reported that both Allawi and Sadr would attend a conference in Syria to try to put together a new government as well. The icebreaker between the two occurred in July when they had their first face-to-face meeting in Damascus. Sadrist parliamentarians and those from Allawi’s Iraqi National List also cooperated on issues in the previous legislature beginning in 2008. Before that the two sides had hostile relations as Allawi, when he was the interim prime minister, okayed a U.S. crackdown on the Mahdi Army in 2004.

The big question now is whether the Sadrists’ backing for Allawi is sincere. Talks between all the lists have led to nothing substantial so far, and the Shiite parties have used previous negotiations with the National Movement as a ploy to pressure each other. The Sadr trend could be doing this again as a means to force Maliki into dropping his nomination to be prime minister. On the other hand, they could really be throwing their weight behind Allawi. They have successfully withstood Iranian pressure for the Shiite lists to re-unite behind Maliki so far, and joining with the National Movement may be their only way to truly show their independence, and use their newfound political clout. Only time will tell what is behind the Sadrists latest moves.

SOURCES

AK News, “Accordance List Leader: “State of Law use Al-Iraqiya to wage pressure on other blocs.”” 7/17/10
- “Sadrist leader: The international community refuses to give Nouri al-Maliki a second term,” 8/5/10
- “Sadrist MP: Govt will be announced next week,” 8/20/10

Tuesday, August 24, 2010

On August 20, 2010 Iyad Allawi, the head of the Iraqi National Movement traveled to Russia. During a meeting with Prime Minister Vladimir Putin, Allawi told the gathered press that the United States was against him, and that they wanted a government that was friendly with Iran. His statement was a way to voice his opposition to Washington’s plan for a new Iraqi government.

Allawi had two goals in mind when he talked with the media in Russia. First, he was right when he said that the U.S. opposed him. As reported before, the Americans have decided to back Prime Minister Nouri al-Maliki for a another term. Allawi is obviously upset with this development as it may cost him the top post in Iraq. Wishing to push back, he claimed the U.S. plan will only benefit Tehran as they support Maliki as well. Iran has been putting intense pressure on the Sadrist-Supreme Council led Iraqi National Alliance to agree to Maliki as PM again, but without success. The difference between the two countries is that the U.S. wishes to see Maliki and Allawi align together with Allawi becoming the head of a new national security council, while Iran wants the two main Shiite lists, Maliki’s State of Law and the Iraqi National Alliance to be the main partners in a ruling coalition, and to sideline Allawi. The Iraqi National Movement has been in intense negotiations with all sides to avoid both of these scenarios, but there has been little headway since the election.

In March 2010 the Shiite vote was split between State of Law and the National Alliance. That allowed the National Movement to garner the most seats, 91 out of 325, in the new parliament. Ever since then they have insisted that only they have the right to put together a new government. That has been for naught so far, as Iran got the Shiite lists to reunite, Washington and Tehran have come out in favor of Maliki, while the Kurds have sat on the sidelines waiting for the Arab parties to work out their differences before seriously joining the fray. That has frustrated Allawi and his list, and was what motivated him to make his statement about Washington playing into the hands of Tehran when he spoke to the press in Moscow. He wants to pressure the Obama administration into changing its mind about the premiership, but that may prove as futile as his previous moves.

Monday, August 23, 2010

In the third week of August 2010 the last U.S. combat unit, the 4th Stryker Brigade of the 2nd Infantry Division departed Iraq. That left around 52,000 American troops in the country, soon to be reduced to 50,000 by September 1. The remaining six Army brigades will be redesignated Advise and Assist units. There will also be 4,500 Special Operations forces, plus Air Force and Navy contingents. The name of the U.S. effort changed from Operation Iraqi Freedom to Operation New Dawn as well, and the main aim is to train, assist, and supply the Iraqi security forces, collect intelligence, protect the Provincial Reconstruction Teams (PRT) and diplomatic staff, maintain the joint U.S.-Iraqi-peshmerga checkpoints in the disputed territories of northern Iraq, and work with the Iraqis on counterterrorism.

Some questioned whether this was simply a semantic, rather than a substantive change for the U.S. Obviously, all American soldiers carry weapons and can defend themselves, and some U.S. units will continue to conduct offensive raids in conjunction with the Iraqis. At the same time, Iran and the Shiite militias it supports are hoping to claim responsibility for the American withdrawal, and are stepping up their attacks. One of those led to the first fatality since the 4th Stryker Brigade departed. On August 22, an American soldier was killed at the Basra Operating Base by rocket fire. Shiite militants were also likely responsible for two mortar shells hitting the Green Zone and a roadside bomb striking a PRT in Dhi Qar the day before, and seven separate rocket attacks upon the Green Zone and the Basra Operating Base the previous week. Sunni insurgents were active as well, lobbing a thermal bomb at a U.S. patrol in Kirkuk on August 20.

What then can the remaining troops expect to face in Iraq? On the one hand, they will work on reconstruction projects, and expanding the capabilities of the Iraqi military. On the other hand, they will continue to come under attack by anti-American forces. There will be very few acts of actual combat outside of those units that conduct raids with Iraqis. Otherwise, most will move back and forth between bases, go out in the field to visit Iraqis, and occasionally come under indirect fire. That was actually what was happening for quite some time before the 4th Stryker Brigade left for Kuwait, but will become more the routine as there are fewer U.S. troops with a more limited range of operations left in Iraq.

On the night of August 21, 2010 around 200 people in Nasiryah, the provincial capital of Dhi Qar, marched to the governorate council building to demonstrate against the lack of power. People in the crowd shouted, “Where is the electricity State of Law?” in reference to Prime Minister Nouri al-Maliki’s list. Some ended up throwing rocks at the police and the council headquarters. That led to clashes with the security forces, who used water cannons to break up the protest. 40 people ended up getting arrested, 16 were wounded, including 10 policemen, and a curfew was imposed upon the city. A spokesman for the provincial council said the demonstration was not spontaneous and claimed an investigation was underhand to determine who was behind it. The head of the council said he didn’t know why people had taken to the streets as he claimed the electricity supply had recently improved.

As reported earlier, authorities knew about the demonstration in advance. On August 16, they sent out police to neighborhoods with bullhorns to tell people to stay away from any planned protest. That obviously did not work.

Back in June there was a larger demonstration in Nasiriyah over the lack of electricity. 1,000 people were said to have turned out, and 16 police were wounded during that incident. That happened after similar actions were taken in Basra and other cities. Those eventually led Maliki to dump the Electricity Minister.

Iraqis are still facing a very hot summer this year. Temperatures are hovering around 120 degrees. Power output is said to stand at about 8,000 megawatts per day, while demand is approximately 14,000. The Electricity Ministry rations out power output to the provinces, but with the heat many are ignoring their quotas and using more, which is overloading the system. On August 12 for example, the governorates used so much that the entire power grid was shut down for seven hours.

There is no immediate relief to be had for the temperatures or the deficiencies with electricity. The lack of services was an issue in both the 2009 and 2010 elections, but the new politicians have not fixed the problem. That can only lead to the growing disillusionment with the government that is overflowing into public anger as seen in Nasiriyah in June and August. That could lead to a real crisis of governance within the country as the public may lose faith in the infant democratic process since it has not addressed their demands.

In more troubling news for the Iraqi oil industry, the northern pipeline to Turkey is down once again. Originally a department head in the North Oil Company that is in charge of the pipeline reported that there was a blast in Ninewa province that knocked it out of service. Later, officials said the problem was a leak that occurred at a point that had previously been bombed. It’s supposed to take 2-3 days to repair the line.

This is only the latest incident to afflict the northern pipeline. Earlier in August and in July the Kurdistan Workers’ Party (PKK) blew up sections of the line in Turkey shutting it down. In July, technical problems closed down operations, and June and April insurgents and oil smugglers had at it as well.

The Turkish pipeline was largely out of service until 2007 because of insurgent attacks, but since then has carried an average of 25% of Iraq’s petroleum exports due to improved security. With all the problems in 2010 however, that has been cut. In July 2010 for example, the line carried an average of 374,000 barrels a day, 20% of overall exports for the month. Insurgents and smugglers are finding holes in the Pipeline Exclusion Zone that protects most of the northern line, while the lack of maintenance and deteriorating infrastructure is causing breakdowns and leaks. It’s for those reasons that northern oil fields received little attention by international companies during the two bidding rounds in 2009, and the Oil Ministry is focusing most of their plans for expansion in the southern section of the country.

Sunday, August 22, 2010

When Iraq’s parliament passed its 2010 budget in January for $72.4 billion, it was expected to run a $19.6 billion deficit. The problem was that it called for 2.15 million barrels a day in oil exports, something that has not been achieved since the 2003 invasion. At the same time, it was based upon a price of $62.50 a barrel, which was below what Iraqi crude was going for at that moment. Rather than coming up short, the government may actually finish the year with another surplus.

The possible surplus would come from higher than expected oil prices, a lack of spending, and loans. For the first six months of 2010 Iraqi petroleum has been selling at an average price of $74.93 per barrel. It reached a high of $79.66 per barrel in April. That has brought in $25.2 billion in revenue, and if it stayed at that level Iraq would earn around $50.4 from oil this year. In 2009 the country only earned $37.02 billion.Another factor is that it has been five months since Iraq’s parliamentary elections and the country still has no government. One isn’t expected to be formed until the fall when Ramadan ends. That has held up government expenditures. Baghdad and the provinces have also never been able to spend all of their money. The 2009 budget for example, was predicted to run a $16 billion deficit, but ended up having a $2.5 billion surplus partly because of lower than expected capital spending, which goes towards infrastructure. The same is likely to happen this year. Iraq has also secured several loans, starting with $3.6 billion from the International Monetary Fund in February, and $250 million from the World Bank, both of which were to go to covering any budget deficit.

Iraq has had surpluses every year since it got back its sovereignty in 2005 from the United States. That’s mainly because the government bureaucracy lacks the capacity to deal with all of the money that it has. That’s especially true for the capital budgets each year. Oil prices have also recovered after being hit by the world recession. Together, these mean that the 2010 budget will be little different from previous ones with extra funds leftover.

SOURCES

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/10
- “Quarterly Report and Semiannual Report to the United States Congress,” 1/30/10
- “Quarterly Report to the United States Congress,” 4/30/10

On August 14, 2010 a bomb went off at the Mosul power station. The explosive cut the gas pipeline that provides fuel for the plant, leading to several areas of Ninewa province losing electricity. This was part of a stepped up campaign by militants in northern Iraq against the country’s power grid. In recent months 18 transmission towers were bombed in Ninewa and Salahaddin, with 14 of them collapsing. The U.S. claims these attacks had minimal impact upon the power supply. That may be because the towers were quickly repaired, electricity was diverted to other routes, or that supply is so spotty to begin with, the loss of a tower had little affect.

Northern Iraq remains one of the most active areas for insurgents. They have been stepping up their attacks in recent months, expanding from their regular operations against Iraqi forces and civilians to include infrastructure. They have been increasingly targeting the oil pipeline to Turkey for example that flows through Salahaddin, Tamim, and Ninewa. The bombing of the Mosul power station, and electricity towers appear to be part of this plan as well. These are all meant to undermine the government by showing the public that they cannot be protected, that the country’s main source of revenue, petroleum, can be threatened, and that power, which is already in short supply, can be cut off. These attacks are still at a very low level, but it is of concern that insurgents are successfully finding new targets.

SOURCES

Aswat al-Iraq, “Sabotage stops power station in Mosul,” 8/14/10

Special Inspector General for Iraq Reconstruction, “Quarterly and Semiannual Report to the United States Congress,” 7/30/10

Thursday, August 19, 2010

Asharq al-Awsat reported on August 18, 2010 that Abu Dura, aka Ismail Hafiz al-Lami, a wanted Special Groups commander recently returned to Iraq from Iran. Abu Dura is a Sadr City native, who joined the Iraqi Army during the Saddam era, and became a non-commissioned officer. He deserted in 2000, and when the U.S. invaded in 2003 he took part in the looting of the capital. He quickly turned to hunting down and killing former Baathists and army officers, and became a brigade commander in Moqtada al-Sadr’s Mahdi Army. He fought against the Americans in the 2004 Sadrist uprising in Najaf. That same year he went to Iran for the first time, where he received training and assistance from the Iranian Revolutionary Guards. Sometime afterward he broke with the Mahdi Army, along with other commanders, who were mad that Sadr agreed to a cease-fire and decided to participate in politics.

During the sectarian civil war of 2005-2007 Abu Dura said that he would cleanse Baghdad of Sunnis, and was notorious for doing away with his victims with an electric drill. His group allegedly killed thousands of Sunnis, assassinated Saddam Hussein’s lawyer, kidnapped a member of parliament, and snatched up workers from the Ministry of Higher Education. Although Abu Dura was publicly condemned by the mainstream Sadrist movement, U.S. forces believed he was still loosely tied to it. During the 2008 crackdown on the Sadr trend, Abu Dura fled to Iran.

Today Abu Dura is said to be a commander in the League of the Righteous, another breakaway Sadrist militia. From late-2009 to early-2010 the U.S. encouraged Baghdad to hold talks with the League to end their outlaw status, but the talks were inconclusive. The negotiations did lead to the release of the movement’s leader, Qais Khazali in early 2010 in return for a British contractor the group had kidnapped. The league had a brief cease-fire, but is now believed to have gone back to attacking U.S. and Iraqi forces, and Abu Dura is allegedly involved in those operations.

The return of Abu Dura is a bad sign for Iraq. Shiite groups like the League of the Righteous as well as Iran are trying to take credit for the U.S. withdrawal by conducting operations against American forces, while Sunni militants are continuing with their high profile mass-casualty attacks to undermine the state. There have also been reports that the various Shiite militias have been fighting each other in Baghdad as well. Such a notorious Special Groups commander as Abu Dura can only be coming to Iraq to sow mayhem at a time of uncertainty over the future of the government and competence of the security forces. What may constrain him are the capabilities of the League of the Righteous. So far, the Special Groups have only been firing rockets and setting off roadside bombs at a very low level. People like Abu Dura may have plans to do more, but he may not have the supplies and manpower to do so. Still his presence in Baghdad can only raise tensions within Iraq.

SOURCES

Cochrane, Marisa, “The Fragmentation of the Sadrist Movement,” Institute for the Study of War, January 2009

Both Washington and Tehran are currently backing Nouri al-Maliki to return as Iraq’s premier, but they disagree about how to form a ruling coalition. The United States is hoping that Maliki’s State of Law and Iyad Allawi’s Iraqi National Movement will come to a power sharing agreement where Maliki remains as prime minister and Allawi becomes the head of a new national security council that is supposed to place some kind of checks on the use of the armed forces, which Maliki has been criticized for in the past. The U.S. is also hoping to sideline the Sadrists for their anti-American views. Iran supports Maliki as well to preserve Shiite control of Iraq, but disagrees upon how to achieve that goal. They want State of Law and the Sadrist-Supreme Council led Iraqi National Alliance to form the backbone of the new government, and don’t want Allawi to have a prominent role because Tehran believes he will bring back Sunni and Baathist rule. Both Iran and America are talking about a national unity coalition after the two main parties are established. That would include State of Law, the Iraqi National Movement, the Iraqi National Alliance, the Kurdish Alliance, and perhaps some of the smaller lists as well.

Despite this congruence of interests, Washington and Tehran are still working at cross-purposes within Iraq. They both support Maliki, they both want the major parties to come together, but they are divided on the role of Allawi. They are also running up against the personal politics of Iraq’s leaders. Allawi and Maliki for example are both demanding to be premier, while the National Alliance does not trust Maliki. This outside influence, plus the shortsightedness of Iraqi politicians is a major reason why Iraq has no government months after the March 2010 elections. When one is formed, it will look a lot like the previous one, and be just as divided, unwieldy, and dysfunctional. How it’s made up will likely show which foreign power has more influence as well, Iran or the U.S.

On August 16, 2010 Iraqi police in Nasiriyah, Dhi Qar walked the streets telling people that they could not participate in a planned protest over the lack of power. One local official said that the provincial council had ordered the demonstration shut down, while the head of the security committee denied that.

Iraq is currently facing 120 degree weather, made worse by the fact that Dhi Qar and other southern governorates are only receiving an average of four hours a day of electricity. In June Iraqis took to the streets in Dhi Qar, along with Basra, Anbar, Wasit, and Diyala demanding that the government provide a better supply of power. There have not been any protests since then, and it appears that some local authorities are determined to prevent any repeats.

Since 2003 the amount of electricity available has increased, but it has always been outstripped by demand. Usage is also seasonal with it obviously increasing during the summer months putting an added strain on the country’s power stations. In February 2010 for example, it was estimated that the power supply met 70% of demand, but that dropped to 66% in May. Poor management, fuel shortages, attacks upon infrastructure, maintenance, and breakdowns are also endemic making the supply inconsistent. With security improving, the lack of services has become a major issue in recent years with electricity at the top of the list. That anger overflowed this summer in places like Nasiriyah, which led to provincial governments panicking, and they are now working to stop any further public outbursts.

Wednesday, August 18, 2010

In May 2010 it was reported that several state run banks had given off the book loans to other financial institutions, and that several officials were under investigation as a result. The Inspector General for Iraq Reconstruction reveals that four high ranking bank officials have been found guilty of bank fraud and sentenced to prison over the matter, and over $300 million has disappeared as a result of the case.

The government dominates Iraq’s banking sector. There are only 43 banks in the country, and the seven largest are publicly-owned. Managers in three of the latter, the Central Bank of Iraq, the Agricultural Bank, and Rafidain bank used the savings of government workers to make $7.7 billion in off the book loans to three private banks, the Bank of Basra and Warka Bank in Iraq, and the Ahli Bank in Jordan. Those turned out to be bad investments and millions were lost in the process. When the news broke of the managers’ activities, two of Iraq’s anti-corruption agencies, the Integrity Commission and the Board of Supreme Audit, along with the inspector general for the Finance Ministry began investigating. Several top officials were brought in for questioning, Warka Bank’s assets were frozen, and eventually four branch managers were indicted and sent to prison. $375 million is still unaccounted for. Whether those were losses, stolen funds, or a mixture of both is unknown. The head of the Integrity Commission said that the loans to the private banks violated several rules. First, they were not reported. Second, the interest rates charged were illegal as well as the size of the loans.

The fraud case points out several problems with Iraq’s banking industry. For example, a December 2008 audit of one of Iraq’s two main banks, Rafidain or Rasheed, found that it had no business plan, no rules or regulations on workers, no reporting rules, no technology, little risk management, and hardly offered any services. Iraq’s banks have been going through reforms since 2005 to fix these problems, but progress has been slow. By Mid-2009, less than one quarter of them followed international banking standards. That’s how managers in four of Iraq’s largest banks could make $7.7 billion in bad loans, with little to no one noticing until months later. Of course, that puts Iraq’s banks in the same lot as many other financial institutions from around the world that lost billions of dollars in poor investments, which caused the current world recession. Then again, some Iraqis went to jail for their actions, which is unlike other countries.

SOURCES

Iraq News Agency, “President of the Bank of Basra prison and the President of Warka fugitive because of suspicious loans,” 5/28/10

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09
Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual," 1/30/10
- “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/10

France’s Le Figaro was the latest paper to travel to Kurdistan to interview truck drivers taking oil and refined products into Iran. One said that an official from one of the ruling parties owned the company he worked for. A member of the Change opposition group accused the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP) of the same thing in a report by National Public Radio recently as well. If true, it would be no surprise as the KDP and PUK are known for having their fingers in most major enterprises in Kurdistan. It would also go to show that the shipment of petroleum and related products to Iran is intimately involved with the Kurdish authorities, not private businesses making their own independent deals with Tehran, as the Kurdistan Regional Government claims.

Tuesday, August 17, 2010

Iraq is an oil dependent country. The industry has been plagued by problems for decades due to wars and international sanctions. One long-lasting issue is oil theft. That began on a large-scale in the 1990s when the government used smuggling to break the United Nations sanctions. The individuals and groups involved in these activities only expanded after the U.S. invasion, as there was a general breakdown in order. Today oil theft remains a major problem for Iraq’s most important resource.

In the 1990s Saddam Hussein organized criminal gangs to smuggle oil to break United Nations’ sanctions. Traditional trade routes throughout the Persian Gulf and Middle East were adapted for these operations. Trucks sent to Turkey, Jordan, Syria, Kuwait and Saudi Arabia, and boats going through the Persian Gulf were all used to ship crude to bring in illicit revenue for the Baathist government. Sheikh Abu Risha, who would later form the Anbar Awakening in 2006, and his tribe, ran an oil smuggling ring to Jordan during this period.

After the U.S. invasion in 2003 these activities not only continued, but also expanded. First the collapse of the state, economy, and general anarchy after the fall of Saddam created powerful incentives in Iraqi society to turn towards crime to make a living. Corruption also spread throughout the country. As a result, criminals, government officials, tribes, militias, insurgents, former Baathists, and new players all became involved in the theft of oil and refined petroleum products.

One factor that facilitated smuggling was the state monopoly over oil. In 1972 the government nationalized the petroleum business. In 1987 Saddam re-organized the industry. Before it was all under the control of the Oil Ministry. Afterward the North Oil Company, South Oil Company, State Company for Oil Projects, and the State Oil Marketing Company were all created for different regions and sectors of the petroleum business. Each has wide ranging autonomy, and there is little coordination between the different parts. The Inspector General for the Oil Ministry for example, issued a report saying that there was a lack of management, control, and oversight. Political parties also have influence over parts of the system. All of these opened up opportunities for theft, sabotage, infiltration, and corruption.

Iraqi tanker trucks waiting to be filled. The shipment of oil and refined products is only loosely supervised which opens up opportunities for fraud and smuggling

Stealing oil today takes many different forms. One is mixing stolen oil in with legitimate oil. A regular crude shipment is topped off with extra petroleum that gets a separate payment. Another involves filling boats or trucks with stolen oil that is then delivered to tankers in the Persian Gulf. A sting operation in 2006 by the Ministry of Oil found 166 craft lined up in rivers in Basra waiting to sail off to meet larger boats in the Gulf. A third is filling up tanker trucks and driving the illegal oil to neighboring countries like Iran, Syria or Turkey.

Tapping into pipelines is another common form of theft. A hole is made in a line, and then crude is siphoned off into trucks or ships. In late 2007 there were an estimated 25 holes in the northern pipeline to Turkey. Some of the security forces meant to protect these lines also colluded in these activities or were the culprits themselves. In 2004 the Defense Ministry hired the Jabouri tribe to defend the Turkish pipeline in Salahaddin and Tamim provinces. The tribe was actually involved in smuggling since the Saddam period, and expanded their activities under their new official cover. A 2009 investigation by the Oil Ministry’s inspector general found that Army units were stealing oil from the same line. Most of this crude remained within Iraq where gangs have mobile refining stations, while some was sold to fuel factories and power stations.

Baiji refinery in Salahaddin was infamous for theft and being infiltrated by insurgents

Stealing refined petroleum products has also become a big business after the U.S. invasion. The demand for fuel, diesel, etc. increased after 2003 because of more cars and power generators. The supply however is limited because Iraq’s refineries lack capacity. The government also subsidizes gas and fuel, keeping prices artificially low. Gangs, militias, and insurgents would buy or steal gas in Iraq, and sell it in neighboring countries where prices were much higher. Other times, the stolen fuel was sold to Iraqis on the black market. The Baiji refinery in Salahaddin was infamous for being controlled by insurgents. Allegedly, they stole around one to two-thirds of its production. A huge illegal market developed around the plant involving security forces demanding payoffs for trucks to leave and enter the refinery and go through surrounding checkpoints, corrupt oil officials and political parties set up gas stations in the area so that they could get fuel from the government, which was then sold on the black market.

Checking the fuel level in a tanker truck to see if it matches the records

Iraq also has to buy refined products from Iran, Turkey, and Kuwait because it can’t meet domestic demand. That process is also corrupted. A delivery would be registered when none existed so that the payment could be collected. Truck drivers would sell products in other countries before even getting to Iraq. Tankers would deliver partial shipments of fuel and keep the rest so they could sell it. Drivers would steal fuel, and then fill up the rest of the truck with cheap local fuels. Some trucks were fitted with two tanks, one at the top that would hold a small amount of fuel, while the second larger tank would hold water. The Oil Ministry’s inspector general reported that from September 2004 to February 2005 1,551 trucks carrying 56 million liters of oil products imported at a coast of $28 million never arrived. Trucking companies were fined $4 million as a result, but it was believed that they made $24 million in the process, so they continued on with their illegal activities.

As the examples show, all of these operations involve corrupt officials, trucking and tanker companies, political parties, and the Iraqi security forces. A truck driver involved in smuggling said that political parties made sure that their followers were operating the pumps when they wanted to steal oil and fill up his truck. Oil Ministry officials would also give fake documents to cover up the theft. In Basra, the Fadhila Party and Sadrists provided protection for the Ashur clan after the U.S. invasion in exchange for 30% of their profits from stealing oil. The clan was said to make $5 million a month from their activities. The Fadhila Party also had its own criminal operations. In January 2005 it won control of the governorship in Basra, and later received the Oil Ministry under Prime Minister Ibrahim al-Jaafari. It also ran the Oil Facilities Protection Force, the Tactical Support Unit in the Basra police, and the Abu al-Khassib port in that province. As a result, the Basra governor’s brother Ismail Waili became one of the largest oil smugglers in Iraq, protected by the local security force and the Fadhila Party. Prime Minister Nouri al-Maliki’s 2008 Knights Charge offensive in Basra broke up most of Fadhila’s operation, but illegal activities continued.

Criminals, shipping companies, and political parties also colluded with Iran. For instance, gangs and tankers in southern Iraq that couldn’t get official papers to cover their smuggling would pay bribes to the Iranian Revolutionary Guards’ Navy to allow them to fly an Iranian flag, or sail under their protection in Iranian waters. The Kurds have been sending oil and refined products to Iran since the 1990s, and continue to this day.

Petroleum is Iraq’s biggest and most important business. It provides almost all of the government’s revenue, and that in turn is used to pay for services, jobs, and the country’s development. Iraq earns several billion dollars a month from the industry, but at least a billion is stolen as well. Refined petroleum products, which are in short supply, are also taken. This all started as an extension of the state when Saddam tried to use smugglers to break U.N. sanctions. After the U.S. invasion, it became a free for all when all constraints were eliminated as the nation descended into chaos. Even with improved security, gangs and political parties involved in crime still operate with impunity. The country is in such dire need that it can’t afford to have so much money go missing. So many actors are involved in the illegal operations however, that it’s unlikely to end any time soon.

Monday, August 16, 2010

The United Nations, as part of its Millennium Development Goals program, has released a new set of statistics on the humanitarian situation within Iraq. The numbers show that the country is still struggling to meet the needs of its public.

Education

Iraq, like many countries in the region, has a very young population. Almost half of Iraqis are below the age of 19 years old. The government faces difficulties educating them. While 87% of boys and 82% of girls are enrolled in school, many drop out before completing their studies. The percentage of youth going to school has also declined. In 2007 85% of kids were enrolled in primary school compared to 91% in 1990. The number of children that have completed 1st to 5th grade however has gone up from 76% in 1990 to 95% in 2006. After primary school there is a sharp decline in attendance, with only 44% finishing that level. Women are also under represented at every educational level. In addition, a little over 300,000 Iraqis aged 10-18 have never gone to school. Compared to the rest of the region, Iran and Turkey do better at 94% and 92% respectively, while Iraq is at the same level as Saudi Arabia at 85%.

Click on image for larger view

The lack of schooling is hurting literacy in the country. The literacy rate for 15-24 year olds increased from 79% in 1990 to 84% in 2007, and 26% of women are illiterate. That gives Iraq the highest illiteracy rate in the Middle East.

Iraqi youth are also not learning important skills for a high technology world and economy. In a survey, 65% said they did not know how to use a computer, and only 13% said they used the internet. Both were lower rates than in neighboring countries.

There has been a marked decline in the quality of Iraq’s schools over the last few decades. In the 1960s and 1970s Iraq had one of the best education systems in the Middle East. Wars and sanctions robbed schools of funding. Displacement, poverty, discrimination against women, deteriorating infrastructure, overcrowded classrooms, security, lack of parent support, kids having little interest in their schooling, and outdated curriculum are all issues. The U.S. embassy in Baghdad has warned that if the education system isn’t improved, the younger generation could be an impediment to peace, stability, and economic growth.

Unemployment

Iraq has high unemployment and underemployment. In 2009 17.3% were unemployed and 29.4% underemployed, meaning almost half of the country struggles to find a steady job. Young people in Iraq face almost double the unemployment rate at 30%. In 1990 the youth jobless rate stood at only 7%. That doesn’t compare well other countries such as Turkey and Iran that have unemployment rates of 20% and 22% respectively for their young.

47% of youth with jobs were also dissatisfied with either their pay or type of work, and women face an even harder time with little over 18% participating in the work force. The percentage of women working outside of agriculture has also fallen from 11% in 1990 to 7% in 2008.

Overall, the Iraqi economy simply can’t provide enough jobs for the 450,000 people that enter the workforce each year. That’s largely because the country is dependent upon oil that is not a labor-intensive industry. In 2008 petroleum accounted for 56% of the GDP, but only 1% of jobs.

Poverty

Click on image for larger view

The lack of work and on-going violence in the country creates high poverty rates. Currently around 7 million Iraqis, 23% of the population lives below the poverty level of $2.20 per day. Rural areas have the highest percentage of poor people at 39%, but the largest concentration of poverty is in the urban centers. Iraq has also faced a sharp increase in food prices since the 1990s due to international sanctions and wars. The government implemented a food ration system as a result, but it only provides inconsistent basics, and has a negative affect upon the country’s agriculture sector.

Infant Mortality

Click on image for larger view

Iraq has made progress in fighting infant mortality, but it is still at the bottom of the region. Infant deaths went from 62 of every 1,000 births to 41 of every 1,000. Salahaddin has the worst rate at 70 deaths for every 1,000 live births. The number of children dying in the first five years of life has also dropped from 50 of every 1,000 children to 35 of every 1,000. That still makes Iraq the second to last in infant mortality rate in the region with only Yemen being below it.

Maternal deaths are another major problem. 84 mothers per 100,000 births die. That places Iraq with 67 other countries that account for 97% of all maternal deaths in the world. Iraq suffers from poor birth practices, inadequate to unavailable obstetric care, and high levels of anemia. That leads to 1 in 4 pregnancies having serious complications, which threaten the lives of the babies and their mothers.

Conclusion

Iraq’s history and economy has severely set back its development. Saddam Hussein’s misguided wars, United Nations sanctions, the 2003 invasion, and subsequent sectarian civil war have devastated the country’s education and health care systems. Professionals fled the nation, infrastructure was destroyed and deteriorated, and government support for services was severely cut. Baghdad today is faced with the gargantuan task of trying to make up for these decades of setbacks. While there have been some improvements in the humanitarian situation, when compared to the rest of the region Iraq still stands near the very bottom.

Friday, August 13, 2010

All four of the major organizations that track deaths in Iraq reported an increase in July 2010. Iraq’s ministries had the largest count with 535 killed. That consisted of 396 civilians, 89 police, and 50 soldiers. That was the highest number by Baghdad since May 2008 when it recorded 563 deaths. The Associated Press had the lowest count with 356 casualties for July, which was the highest they had noted since 383 killed in December 2009. That left Iraq Body Count, which consistently has the highest death count, in the middle with 469. Icasualties was on track to have the lowest amount as usual, but then added 264 deaths at the very end of the month based upon news about the Iraqi Ministries’ high figure for a total of 534. All together that averaged out to 15.2 deaths per day, a dramatic increase from the first six months of the year that averaged 9.2 killed a day.

Monthly Death Counts

Month

Iraq Body Count

Icasualties

Iraqi Ministries

Associated Press

Avg. Deaths Per Day

Jan. 10

258

135

196

177

6.1

Feb.

296

236

352

255

10.1

Mar.

311

183

367

230

8.7

Apr.

376

259

328

321

10.7

May

370

279

337

278

10.3

June

353

176

284

294

9.4

July

469

534

535

356

15.2

The amount of security incidents in July was actually lower than previous months, but there were a number of high profile, mass casualty attacks. On July 8, 48 Iraqis were killed and 380 wounded in a series of bombs aimed at Shiite pilgrims traveling through Baghdad. Ten days later two suicide bombers attacked Sons of Iraq waiting to receive their paychecks in the Radwaniya and Yusifiya neighborhoods of the capital, killing 65 and wounding 60 others. That was followed by two car bombings on a checkpoint outside of Karbala on July 26 that left 19 dead and 47 wounded. Finally, on July 29 five improvised explosive devices (IEDs) went off in Adhamiyah, Baghdad killing 16 and wounding 14. All together these attacks resulted in 158 dead, and 501 wounded. Adding that number to the average deaths in the first six months of 2010 accounts for the large increase in deaths in July.

Even with the growth of casualties in July and the inability of Iraq’s politicians to put together a government five months after parliamentary elections, the security situation is still much better in 2010 than in previous years. Attacks and deaths have seen a steady decline since the end of 2008. From 2003 to 2007 12,000-27,000 Iraqis died each year according to Iraq Body Count. That dropped to 9,221 in 2008, and then went down again to 4,645 in 2009. If casualties remained at the same level this year, Iraq would end up with approximately 3,900 deaths in 2010. That still makes Iraq one of the most violent countries in the world. For comparison, the United Nations recorded 1,271 civilian deaths in Afghanistan in the first six months of 2010, the highest amount in several years. That averages out to 211.8 per month. Iraq’s ministries reported 1,376 civilians killed during that same period, for an average of 229.3 per month. Iraq’s lowest death count was still above Afghanistan’s most deadly period. Unfortunately, the country is likely to see several hundred deaths per month for the foreseeable future as Iraq’s militants have proven their resilience and adaptability.

About Me

Musings On Iraq was started in 2008 to explain the political, economic, security and cultural situation in Iraq via original articles and interviews. I have written for the Jamestown Foundation, Tom Ricks’ Best Defense at Foreign Policy and the Daily Beast, and was responsible for a chapter in the book Volatile Landscape: Iraq And Its Insurgent Movements. My work has been published in Iraq via NRT, AK News, Al-Mada, Sotaliraq, All Iraq News, and Ur News all in Iraq. I was interviewed on BBC Radio 5, Radio Sputnik, CCTV and TRT World News TV, and have appeared in CNN, the Christian Science Monitor, The National, Columbia Journalism Review, Mother Jones, PBS’ Frontline, the Center for Strategic and International Studies, the Institute for the Study of War, Radio Free Iraq, Rudaw, and others. I have also been cited in Iraq From war To A New Authoritarianism by Toby Dodge, Imagining the Nation Nationalism, Sectarianism and Socio-Political Conflict in Iraq by Harith al-Qarawee, ISIS Inside the Army of Terror by Michael Weiss and Hassan Hassahn, The Rise of the Islamic State by Patrick Cocburn, and others. If you wish to contact me personally my email is: motown67@aol.com